Silverstein Financial Woes?

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March 14, 2010 5:59 AM
Silverstein aims to avoid midtown default
In talks to modify loan on 575 Lex; other properties safe
By Theresa Agovino
88%
RISE in loans sent to special servicers from 1/09 to 1/10

Developer Larry Silverstein, who has been feuding with the Port Authority of New York & New Jersey over building towers at Ground Zero, faces imminent default on one of his existing office buildings: 575 Lexington Ave.

The $325 million balance of the loan on the building, which Mr. Silverstein holds along with the California State Teachers' Retirement System, was transferred to a special servicer last week, according to Fitch Ratings. Special servicers try to salvage troubled loans for lenders.
One of seven for Silverstein

The partners purchased the 35-story building, one of seven office towers owned by Silverstein Properties Inc., for about $400 million in 2006. It is currently 84% occupied.

According to a statement from Silverstein Properties Inc., the transfer was done at the company's request to facilitate ongoing discussions about how to modify the loan. What's more, the statement said: “The debt is secured exclusively by the property and is not cross-collateralized with any others. It does not impact any other developments or properties in which Silverstein Properties and its various partners are invested.”

The credit crunch has pushed an increasing number of owners' loans into special servicing. Owners who have a loan coming due or who are having trouble meeting their existing obligations have very limited options for raising cash.

The number of loans transferred to special ser-vicing skyrocketed to 398 in January, an 88% increase over the year-earlier figure, according to Trepp, which tracks real estate debt. In January of 2008, a mere 38 loans were transferred to special servicing.
Greater need for special servicing

Paul Mancuso, vice president of product management at Trepp, expects the number of transfers to continue to rise, because many loans are coming due in the next couple of years and funding for large properties remains very tight.

Earlier this month, the $1.2 billion loan on 666 Fifth Ave. was transferred to special servicing. It's the largest New York City loan to be transferred, according to Mr. Mancuso. Kushner Cos. bought the property in 2007 for $1.8 billion; at the time, the transaction was the largest office building purchase ever.
Filed Under :

Fitch Ratings, Larry Silverstein, Issue News, Port Authority of New York and New Jersey, Silverstein Properties